It's a bellwether.
I think it's very likely that within a decade other giants like LVMH will take their brands out of play.
Here's a blog post with expanded thoughts on the subject:
http://theeyewearblog.com/kering-eye...what-it-means/
Discuss.
It's a bellwether.
I think it's very likely that within a decade other giants like LVMH will take their brands out of play.
Here's a blog post with expanded thoughts on the subject:
http://theeyewearblog.com/kering-eye...what-it-means/
Discuss.
Most of the quality ones have always done it that way and the others are strong agreements with final say on the important items. We are a luxury dealer and most of the brands we carry offer me the opportunity to speak with the owner and or designers so this is a very different situation than in the real luxury market vs having a strong name in another area that does not carry over to optical products.
If you only have 100 doors that carry your product in the US market there is not much chance of losing control of the brand image.
Luxury or not, the feedback loop from experienced opticians is completely NOT THERE!
They think who they are!
B
Last edited by Barry Santini; 10-14-2014 at 03:13 PM.
Originally Posted by Craig
Craig, Any frame manufacturer would die of a hart attack if he would only have 100 doors on the USA where his products would sell.
Canada is 100:10 compared to the USA so that would make it 10 doors.
I was in the frame business in the 60s and 70s when the brands changed from the manufacturers name to, designer name brands, starting with Christian Dior. The guy that started it was Wilhem Anger in Austria the pioneer of Optyl frames.
These designers and all that followed ever since, had never ever seen nor designed a spectacle frame, same as shoes and hand bags. It was all for lending or selling the right to their names for green cash.
I would actually not be surprised if the trend would change back again to names that become a sign of quality, either higher or lower.
Actually AO started licensing almost 15 years before Anger with Claire McCardell. Tura held the Dior license before Anger. Carrera was the first company to do heavy volume, though.
If the fashion house is getting 100% of sales revenue, as opposed to a 14% royalty, they can net as much while being more selective. Roberto Vedovotto, formerly of Safilo, is heading Kering Eyewear. I suspect they can pursue any number of options.
If I were them I might develop other brands in the portfolio and tie access to Gucci product to buys of Brioni, Volcom or whatever else they're selling. If they leverage their best selling brand to achieve high minimum orders of Kering Group product, they can achieve greater exclusivity simply by increasing minimum orders in this way.
How would you respond?
There's a reason that licensing is an important and time-tested business strategy. It is far from certain that Gucci will manage to distribute, service and get paid for its eyeglass frames on the scale that a company like Safilo can manage. Being a successful brand selling shoes, apparel and perfume does not mean you can succeed selling eyewear to opticians.
Early on in 2000 or so Prada did attempt this and it was an apparent flop. They very quickly learned that the easy cash flow came from handing the ball to luxottica.
I have a huge doubt that these companies really understand what needs to be done and what the pitfalls will be as far as optical sales go.
If you have Kering's resources you simply hire the best sales reps in the territories you're focusing on. You also make sure product is up to snuff. You hire the best QC people and/or buy a few facilities. I'm sure they're familiar with how a production chain and sales and distribution works.
Volume might be lower at first but it will grow. And 100%>14%, so they can be more profitable while selling less product. If you look at their brand portfolio, you'll see a lot of brands they could focus on and grow better. They'll have a closer focus on their own brands than a multi-brand licensor would and can likely help them achieve higher ceilings.
At the price points they're probably going to charge gross margins will likely be around 95%. As a separate division, if they're careful, they can easily net 30% to 40%. They might not make as much their first couple years, but as their distribution network grows profits will overtake current royalties. They'll simultaneously be able to increase brand equity be making their things less ubiquitous.
"And 100%>14%"
The 14% is cream off the top and is basically all profit.
They will be lucky to truly net out more than 14%, even with 100% of the wholesale revenue. The true all-in costs involved are high and the capital investment will be high as well. Of course they might succeed, but this will be a very bumpy road in all likelihood.
Lux having an in-house porfolio of Rayban, Persol, Mikli, Oakley and Oliver Peoples (to name a few) is a huge master stroke by them, and they could lose a license or two, (easily replaced anyway) and not miss a beat. The addition of MK in 2015 makes them even stronger. I am no big fan of L, but these guys know what they are doing in optical. Gucci going it alone will be very interesting to watch.
The advantage Kering will have with its higher end brands is margin. When gross margin is 95% you can bite the cost of poaching the best reps on the ground and the best support people at every link of the chain from production through sales and distribution.
They'll have to work for it but after the operation finds its feet their net will grow. These are not amateurs. They will hire who they need from the optical industry. They already have brand equity and a lot of retail doors. They're in a very good position with the capital to do whatever they want.
I'd be very surprised if they don't net more within a few years.
I think the idea of luxury eye wear is dead, anyway. The minute China decided they could knock off a good look, eye wear prices began to plummet (I'm thinking about year 2000).
I understand why Gucci would be unhappy with Safilo's grotesque handling of the strong brand. I can understand them saying "we'll do it ourselves, or not do it at all". It just removes the facade of "luxury dispensing" that so, so many opticals pretend they do.
Prada, Gucci, Fendi, Spade, whatever "fashion brands" there are in the optical business have to know they sell their brand down the river for an easy buck. And consumers can feel like they're getting something, although those of us in the industry know they're merely buying a logo on a Chinese frame. That's not haute couture or quality or exclusivity.
If I were in the frame industry, I'd try to develop eye wear brands on their own and stop the silliness.
Last edited by drk; 10-15-2014 at 01:56 PM.
Anything in optical...AND I MEAN ANYTHING...frames, lenses, lab, distribution...ANYTHING...is better WITHOUT ANYONE WITH EXPERIENCE>
There. I said it.
B
Barry, WOW ......................and we all know that you do have experience and lots of it, so that makes it a tough statement.
Maybe you could go a little more into some details ?
yes please because that truly makes zero sense
It is interesting to watch the frame giants take a fancy fashion label and slap it on the goods they mash together in their hot dog factories. It is silliness but I suppose it still works. Frames are a consumable plastic item which are a natural magnet for branding, and I don't think fashion is dead or dying. So it goes.
Warby Parker, among others, has shown that it takes very little imagination or effort to make a knock off vintage-y collection in China and slap a slick but unknown name on it and get market traction. In the area of optical frames this is pretty easy, however for plano sun I find a name brand is needed.
In the end though it is us, the ECPs who decide what goes on our boards, it is us who have bought into the armani-chanel-gucci-prada-etc... overpriced/hyped lux-empire-building game. We are great at aiding and abetting these giant corporations in building their monopolies at our expense, making others rich while eroding our own businesses and independence - when we should be building our "brand" as professionals. It is beyond silliness. I can say that in my tiny but independent optical fiefdom we have strategically moved away somewhat from this bad habit, both in lenses and frames.
The big problem with doing truly fashionable frames is the limited number of opticians who'll touch the stuff. Although a few opticians get it and draw the right customer, optical dispensaries are not a fertile ground for high style products.
It will be interesting to see if Kering does more interesting things with Gucci product. I suspect they will. Perhaps design will no longer be dictated by what will sell through at dispensaries. Gucci already has a respectable network of their own stores as well as lots of majors worldwide. Maybe this other customer base will dictate design going forward.
As far as what Barry was talking about, My experience in trying to work with people in the industry is they fail to adapt to current realities and are attached to doing things as they've always done them. 5 years ago I was advising someone going after the same niche WP subsequently gained traction in. It was an industry player with substantial resources. It was impossible to get them to see the value of a proper marketing campaign. They didn't believe in a credible marketing budget. WP ultimately spent the resources and reaped the benefits.
I was talking to a venture capitalist about this. There's no feel for marketing in optical, from the top down. Perhaps because most successful sales efforts by vendors had always been directed at opticians, there's a general obliviousness to the importance of marketing to end consumers. People in the industry fail to see things like this that are obvious to people outside.
Or maybe Barry can correct me if I'm misinterpreting his statement.
+1000
There is soo much misinformation recommunicated under the guise of teaching that I really have a hard time with it.
Those here who are patient, and are seeking the ultimate truth (if attainable), know what I am talking about.
B
Moss: You are on track, as always.
Basically, we lived(ed) in a constipated optical universe, with no realy incentive to embrace change because we were constantly being told by friends and family that:
"People will always need glasses"
The problem today is, they just might need them from you!
B
What I DO like about it is the security of knowing that if I do business with the brand's OWNER and not the LICENSING MFR I won't have the headache of the possible manufacturer switch every couple of years. But I'm worried about the prices going through the roof. Gucci's are already retailing for $300-$500 NOW. Gucci is my best-selling upper echelon frame line in my lower-middle class neighborhood I work in.
I would hate to not be able to offer it anymore because my office isn't "upscale enough" to be allowed the privilege.
Last edited by SeaU2020; 10-14-2014 at 06:44 PM.
Its not the manufacturing that is the issue, its the distribution. To cover the entire country (esp with the vast distance in the Western US) is tremendous undertaking. Europeans come here and the first they discover is how big the US is. Not just in size, but in the incredible amount of miles a rep has to drive to cover accounts. Its a huge impediment.
Own the distribution (the reps really) you own the line.
Good point!
Of course you're right. Ever wonder how and why licenses became so necessary?
http://theeyewearblog.com/why-is-the...anding-part-1/
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